The Act levied a tax equaling roughly one dollar on anyone who dealt commercially in cannabis, hemp, or marijuana. The Act did not itself criminalize the possession or usage of hemp, marijuana, or cannabis. It did include penalty and enforcement provisions to which marijuana, cannabis, or hemp handlers were subject. Violation of these procedures could result in a fine of up to $2000 and five years' imprisonment.

Some parties have argued that the aim of the Act was to reduce the size of the hemp industry [3][4][5] largely as an effort of businessmen Andrew Mellon, Randolph Hearst, and the Du Pont family.[3][5] With the invention of the decorticator, hemp became a very cheap substitute for the paper pulp that was used in the newspaper industry.[3][6] Hearst felt that this was a threat to his extensive timber holdings. Mellon, Secretary of the Treasury and the wealthiest man in America, had invested heavily in the Du Pont families new synthetic fiber, nylon, which was also being outcompeted by hemp.[3] In Western Europe, nobody banned the cultivation of hemp in the 1930's but the commercial cultivation ceased almost anyhow in the decades after the 1930's. Hemp was simply ousted by artificial fibres.[7]

The American Medical Association (AMA) opposed the act because the tax was imposed on physicians prescribing cannabis, retail pharmacists selling cannabis, and medical cannabis cultivation/manufacturing; instead of enacting the marijuana Tax Act, the AMA proposed cannabis be added to the Harrison Narcotics Tax Act.[8] The bill was passed over the last-minute objections of the American Medical Association. Dr. William Woodward, legislative counsel for the A.M.A. objected to the bill on the grounds that the bill had been prepared in secret without giving proper time to prepare their opposition to the bill.[9] He doubted their claims about marijuana addiction, violence, and overdosage; he further asserted that because the word Marijuana was largely unknown at the time, the medical profession did not realize they were losing cannabis. "Marijuana is not the correct term... Yet the burden of this bill is placed heavily on the doctors and pharmacists of this country."[9]